ChartwellsDining Services is considering an upgrade to their commercial cooking and refrigeration equipment.The new equipment would cost $500,000, before considering the sale of the current equipment or any tax savings or losses that will occur as a result of that sale.

The current equipment was purchased 2 years ago at a cost of $226,500 and is being depreciated using an accelerated depreciation method.The book value of the current equipment is the cost, less the accumulated depreciation from the last 2 years.If new equipment is purchased, it will be depreciated using the same accelerated depreciation method (table below).In addition, purchasing the new equipment will allow Chartwellsto sell the current equipment for $33,300, the current market value.Finally, new equipment will result in annual cost savings for the next 5 years in varying amounts (listed below).

Chartwellshas a tax rate of 31% and requires a return on investment of 8% for all capital expenditures.

DepreciationIncremental Cash Flow (Cash Savings)

Year 1 = 21%$41,000

Year 2 = 33.2$41,000

Year 3 = 20.2%$22,000

Year 4 = 12.5%$20,000

Year 5 = 13.1%$16,000

What is the net present value of replacing this asset?